Chinese Internet Giant Will Leverage Data-Mining and Marketing to Promote Its Entertainment Offerings

Alibaba, already an e-commerce giant, wants to be a movie studio, too. The Chinese internet giant is preparing to make its first film, based on a short story from a writer who was discovered when his work went viral on social media. Meanwhile, the company is plotting to leverage its marketing power to promote its entertainment offerings.

Alibaba announced this week that it is recruiting major talents for its first movie project. Hong Kong auteur Wong Kar-wai ("In the Mood for Love") is producing, actor Tony Leung will star, and bestselling author Zhang Jiajia will direct the movie based on his own short story, "Bai Du Ren," or "Ferrymen."

China's internet giants are battling to control entertainment content in a country where online video is a hot growth area (if not really profitable yet), and where last year's box office sales surged 36%. But how exactly do Alibaba's filmmaking ambitions fit with its e-commerce business?

Alibaba says it has 307 million active customers shopping on its platforms. It can tap into its trove of consumer data to learn about and target entertainment viewers – their profile, location and what they search for and buy. In 2013, the company reorganized and formed a 800-strong data division. Alibaba has also been offering investment products, and last year it started a fund to crowdfund movies, giving the company insights into what entertainment people want.

After figuring out which viewers match which content, it can target them with marketing messages. The company's shopping platforms will promote and sell its entertainment, too, Alibaba said this week on its news site, Alizila.

Alibaba sites are a first stop for anybody buying online in China, and the company makes most of its money from selling advertising within its platforms, according to data from Chinese internet researcher iResearch. That strategy has paid off: Alibaba has a greater share of the digital ad market than Twitter, Yahoo or Amazon, according to eMarketer.

The company will "leverage Alibaba's cloud computing and big data technologies to help tap customer demand and create a comprehensive ecosystem for its film and television production and marketing businesses," Zhang Qiang, CEO of Alibaba Pictures, said in a statement.

The company also said it would work with retailers that sell merchandise on its platforms to design and sell products related to entertainment offerings.

Amazon and Alibaba

Last year was a busy one for Alibaba: It had a record-breaking $25 billion initial public offering in New York, but it also invested in entertainment.

Alibaba spent $804 million for a controlling stake of ChinaVision Media Group, renaming it Alibaba Pictures. The company and a private equity firm founded by Alibaba's Jack Ma bought a $1.22 billion stake in online video platform Youku Tudou. In October, Mr. Ma toured Hollywood studios.

By leveraging its data to target films to customers, Alibaba is taking a cue from Netflix, which upended the U.S. entertainment business with algorithms that give people tailored suggestions on what to watch. It's similar to Amazon in that it's an e-commerce company getting into original entertainment content. (Amazon just gained credibility on that front by winning a Golden Globe for best TV comedy for "Transparent.")

China may offer possibilities for Alibaba beyond what those U.S. companies can hope for in their market.

"There's a bigger opportunity for (Alibaba) because there isn't nearly the kind of competition there is in the U.S., which is a much more mature market," said Robert Cain, a producer and consultant on China's film industry who founded Pacific Bridge Pictures. Given Alibaba's resources, customer relationships and online delivery capabilities, it could become a major studio, he said: "It wouldn't surprise me if that's their goal."